Please help

[needinganswers]

We need to know if Key Bank is privately owned. Anybody knows? We searched the website and it doesn't say. The reason we're checking is that we received a re-affirmation agreement regarding the student loan. We're confused as to why we would receive a re-affirmation agreement if the loan is government funded?? We're hoping that the bank is privately owned, so that we can actually include the loan on the BK. Our lawyer spoke with the Key Bank lawyer, and he can't even say if it's privately owned or backed by the government. He said that the documents we signed should say it. Well, I would think as a lawyer for the bank, he would know this piece of information, right? Anyway, our lawyer convinced the Key Bank lawyer that we will not re-affirm because, first of all, my husband is still jobless. We're just hoping and praying that we could include this student loan on the BK. We filed last June, 341 last month, and last day of objection on 09/19. Thank you in advance for any help given.

[HHM]

It's not so much whether the bank is privately owned or not, all student loans are actually funded by banks (the banks actually provide the money for the student loans), but its a question of whether the loan was a federal student loan
(i.e. like a Stafford Loan) or a private loan (i.e. non-federally backed student loan). If its a private student loan (which I suspect it is because they are offering a reaffirmatio agreement), then it may be discharged. Private student loans are basically signature loans.

[needinganswers]

Thank you HHM

Thank you so much for your help and reply, HHM. We are hoping that we could get rid of this debt as it is the biggest piece of the pie. It's just a mere $100K.

[HHM]

Odds are if the student loan debt is $100k, its probably not all "private" student loan debt.

[needinganswers]

What do you mean not all private? $70K was used towards school and $30K was used for personal since my husband was out of school, he needed the money to pay bills (credit cards, car loans, housing, food). We're just hoping that it will be discharged. Thanks again HHM.

[originalhealer]

I think a good rule of thumb is whether it required a credit check or not. All guaranteed student loans (Stafford loans) do not require a credit check. The exception is the PLUS loans for parents. Unless someone else knows better?

[needinganswers]

Actually, am confused. There's this company called Great Lakes and supposedly they are a guarantee or service loan organization who helps out students. They get the money from the bank, and they in turn dispurse the money to the school on behalf of the student. The lady I spoke with at Great lakes informed me that if the student is denied loan from the school, then other privately owned banks like US Bank or Key Bank could provide the loan at a higher interest rate. My husband was approved under Key Bank and that he needed a co-signer who is me. Am not sure if I'm making sense. Anyway, out of the $100K, $70K was used towards school and $30K was used for personal (rent, credit card bills, food, car loan) and another $10K for, I guess, finance charge. We're just hoping that we could add this to BK because we're looking at $750 mo. payment for the next 20 years. Thanks again, HHM.

[needinganswers]

Yup, they required a credit check. Otherwise, my husband wouldn't have been approved without a co-signer. Thanks for the feedback originalhealer.

[HHM]

Basically, you are going to have to gather all your loan paperwork and see a lawyer, there is no way any of us on this forum can tell you for certain.

To me, it just seems like a $100,000 is "school loans" is a relatively large amount for purely private student loans, but I suppose its not unheard of. Here is the question you need to find out, is Great Lakes a for profit, or not for profit organization, if its not for profit, then your school loans may very well be non-dischargeable.

Here is the statute text in the Bankruptcy code regarding non-dischargeability of student loans, maybe after reading it, you can tell us what the status of your loans might be

(8) for an educational benefit overpayment or loan made, insured or guaranteed by a governmental unit, or made under any program funded in whole or in part by a governmental unit or nonprofit institution, or for an obligation to repay funds received as an educational benefit, scholarship or stipend, unless excepting such debt from discharge under this paragraph will impose an undue hardship on the debtor and the debtor's dependents;11 USC 523(a)(8)

The part that gets a lot people in trouble is this section "or for an obligation to repay funds received as an educational benefit, scholarship or stipend" as the case can be made that that sentence even covers private student loans.

[needinganswers]

HHM, I did more research. I don't believe my husband was approved for financial aid under the FFELP program instead he got approved under the Alternative Loan. Key Bank (who is a private lender) is under the Alternative Loan which is handled by Great Lakes who is the guarantor and servicer. By the way, Great Lakes is a non-profit organization based on their website address. I still don't understand why a student would need a guarantor or servicer to obtain a student loan. Why not get it directly from the source who is Key bank? So now, Key Bank is sending us re-affirmation agreements which our lawyer is refusing to have us sign because, like I said before, he's still jobless. We already have a $209 negative on our expense list plus another $750/mo. for this. He studied to become a pilot in case you're wondering how we managed to accumulate a debt of $100K. I know, I know becoming a pilot at this time is not exactly a good idea. But that's what he wants to do, what can I say? I guess at this point come what may. Thanks again for all your help.

[HHM]

Your lawyer is right, you do not want to sign the reaffirmation agreement, but it sounds like to me that these school loans MAY BE non-dischargeable. Since you have a lawyer, what is your lawyer's opinion regarding these loans?

And, strictly speaking, all student loans come from banks, but its the government programs that provide the guarantee for the banks to make the loans. With that little guarantee, the student loans become non-dischargeable.

[needinganswers]

She said that if Great Lakes is a non-profit organization, and they funded the loan through Key Bank, then the loan would not be dischargeable. She will check with the attorney in writing and forward the response to me. I will keep you posted. Thanks again!

[needinganswers]

HHM, I think I answered my own question. The student loan is funded and secured by Key bank who is a private or commercial lender, but the servicer and guarantor is Great Lakes Educational Loan Services, Inc. They are a public company who is operating under Great Lakes Higher Education Guaranty Corporation who is a non-profit agency. I guess Great Lakes Educational Loan Services is acting as an agent for the federal government in administration and insurance of FFELP loans made by private lenders. Also called "guaranty agency" or "guarantee agency". That means the loan is non-dischargable. Am I right? Then why would Key Bank send the re-affirmation agreement if the loan is guaranteed by the gov't anyway? I hope I'm wrong. Thanks again for your input.

[HHM]

I think your analysis is probably right; but I agree, I don't understand KeyBanks offer of a reaffirmation agreement. Does the Reaffirmation agreement offer anything different than the orginal loan (i.e. lower interest rate, reduced balance, favorable credit reporting)?

If you are uncertain, you can discuss with your lawyer doing a "Motion to Determine the Dischargeability of the Debt" and get a ruling from the BK court. This might be the way to go because when it comes to these types loans, when its a post secondary institution that is not a university or college (I am assuming here that he attended some dedicated flight school), the financing and loans get really tricky and wierd.

I hope things work out for you, good luck with your bankruptcy.

[needinganswers]

Hmm . . . I'll bring that up to our lawyer. Again, we appreciate all your input. Thanks again.